Term Paper on "Country Entry Risk Assessment"

Term Paper 6 pages (1735 words) Sources: 1+

[EXCERPT] . . . .

Country Entry Risk Assessment

Alba Organics has a unique product offering, of high quality, herbal based, cruelty free skincare products. They have been committed to the development of what they deem to be Consciousness Cosmetics for more than a decade. Entry into the Portuguese market offers certain benefits, such as the Portuguese people's commitment to high moral standards, which would be conducive to cruelty-free, environmentally responsible products such as Alba Organics. However, there are risks as well that need to be taken into consideration.

The Portuguese market is small and growing at only a nominal rate, in comparison to other EU countries. The population is still primarily located in rural areas. Although the euro is quite stable currently, that could change, affecting Alba's profitability. and, there are three primary, well-established competitors that control the majority of the market share currently, with large financial backing that could out compete Alba.

Abstract

Company Overview and History:

Portugal Overview and Culture:

The Portuguese Economy:

Portugal's Infrastructure:

Portuguese Geo-Political Issues:

Portuguese Exchange Rate:

The Skincare Market Industry in Portugal:

Method of Product Entry:

Summary:

References

Country Entry Risk Assessment

Company Overview and History:

Alba Organics is a division of Avalon Natural Products. Avalon was founded in 1989 based on four principles: quality, innovation, integrity, and leadership. With those principles as their foundation, today Avalon, through their Alba Organics division, offers a unique collection of quality personal care products. These products are specially designed for consumers who are seeking natural, organic, and cruelty-free product lines. Their products are never tested on animals, and are 100% vegetarian ("Alba: FAQs," 2005).

Avalon Natural Products has worked to create the purest, most effective, personal care products, on the market. They have a profound respect for all life. They "strive to create an experience that is sensual, satisfying, effective and conscious of the greater good - (the consumer's) health, the environment and general well-being" ("Our story," 2005).

Alba Organics uses European tradition, coupled with modern technology, to get the best of both world in innovation and quality. They utilize herbal ingredients, which have been proven scientifically to be effective. They not only focus on whether or not the product works, but that it also feels good and engages the senses ("Alba: FAQs," 2005).

Avalon Natural Products, as a corporation, is dedicated to the expansion of organic agriculture. They strive to select organic ingredients for their products that "support the highest ideals of sustainable, organic agriculture, a cleaner environment, and good health" ("About us," 2005). To this end, they have developed their Consciousness in Cosmetics program.

Their Consciousness in Cosmetics program is based on the knowledge that the skin is the largest organ of the body, and that much of what is put on the skin is absorbed into the body ("Consciousness," 2005). Consciousness in Cosmetics is based on five elements. These five elements include: purity and safety, sustainability, products that work, sensuality, and personal choice, which include their cruelty-free commitment ("Five elements," 2005). These five elements affect the company's decision-making process, from packaging to ingredients choices to delivery systems ("Mission," 2005).

Portugal Overview and Culture:

Alba Organics is considering entrant into Portugal. To fully understand the entry risk of this country, it is important to first have an overview of the country, along with an understanding of the culture of their people.

Portugal has a population of about 10.5 million. The country has a relatively small urban population, unlike other industrialized countries. and, of this population, most are Mediterranean, with very little ethnic diversity. As an example, Black Africans, who have been migrating to Portugal ever since de-colonization, comprise less than 1% of the population. The official language of the country is Portuguese, and more than 90% of the population is Roman Catholic ("Portugal," 2005).

The Portuguese people are traditional and conservative, generally. "Change and innovation are only accepted after careful consideration, and then quietly. People and relationships are more important than time" ("Portugal," 2005).

The Portuguese are a socially conscious people, which place a great emphasis on moral values, even more so than other European countries. They are culturally proud, and are open and friendly. Relationships, as mentioned earlier, especially friendships are made for a lifetime ("Portugal," 2005).

The Portuguese Economy:

Portugal joined the European Community in 1986. Since that time, they've seen significant economic development. The entire country, both urban and rural areas, have benefited from the growth, which exceeded that of the European Union average throughout the 1990s ("Portugal," 2005).

In 2001 through 2003, Portugal lost some economic ground. However, it began to see renewed growth in 2004, but still remains to be one of the poorest EU members. This is partially due to moderately high inflation and unemployment rates, as well as the difficulty the country is having in keeping the public debt within the EU limits. Portugal's primary economic challenges lie in the need to modernize their markets, industry, workforce and infrastructure ("Portugal," 2005).

Another economic challenge, for Portugal, is the significant informal economy that it has. Although this gray market creates jobs and relieves social tension, in Portugal, it allows companies to evade fiscal and regulatory obligations, including value-added taxes, income taxes, labor market obligations, and product market regulations (Farrell, 2004). For too long, Portugal has relied on integration with the rest of the EU and its low wages, in comparison to other EU countries, for economic stability. It needs to focus on increasing productivity and competitiveness in the global economy (Carioca, Diniz, & Pietracci, 2004). "Real GDP growth is expected to pick up further and reach 2.75% in 2006. By any measure, the economy would still not be operating at its potential at the end of the projection period" ("Portugal below," 2004).

Portugal's Infrastructure:

Portugal has a good network of paved roads, which facilitates its primary method of transportation, by automobile. Although this network is good, and have seen recent improvements, thanks to EU subsidies, few of them are as modern as those in other EU countries. Trains also connect most areas. Lisbon has an adequate ferryboat system ("Portugal," 2005).

Portugal's communications system is also good. Mobile phones are becoming more and more popular, and television is the primary source of information for Portuguese, followed by radio. They have multiple television channels and radio stations, along with six major daily newspapers that are published countrywide. In addition, 40% of the population uses the Internet ("Portugal," 2005).

Portuguese Geo-Political Issues:

Portugal is divided into eighteen districts and two autonomous regions. Their president is the chief of state, with the power to veto approved laws, dissolve parliament, and set the date for new elections, when necessary. The prime minister serves as head of government and is usually the leader of the legislature's dominant party, or comes from a coalition of several parties. "Portugal's unicameral Assembly of the Republic has 230 members, all of whom are directly elected" ("Portugal," 2005). As mentioned, Portugal is a member of the European Union. They are a geo-politically stable country.

Portuguese Exchange Rate:

As a member of the EU, Portugal has adopted the euro as their primary form of currency. The euro has appreciated sharply against the U.S. dollar since mid-2002, but since the beginning of 2005 it has weakened slightly.

The euro came under heavy selling pressure after the French and Dutch voted against the proposed EU constitution in late May/early June. Despite the loss of confidence in the euro, (EIU) still expects it to appreciate against the dollar in the second half of 2005. (EIU's) central forecast is for the dollar to depreciate to U.S.$1.37:€1 by the end of 2005, remaining close to this rate in 2006 ("Outlook for 2005-2006," 2005).

The Skincare Market Industry in Portugal:

In 2003, the Portuguese skincare market grew 4.8%, and reached a value of $134.5 million. By 2008, the market is forecasted to have a value of $166 million, increasing by 23.2%, since 2003. In 2003, Portugal's skincare market volume grew 1.9%, to reach a volume of 17 million units. and, by 2008, it's been forecasted that the market will have increased by 9.4%, since 2003, to a volume of 18.7 million units ("Skincare," 2004).

The skincare market includes both mass and premium products for facial, hand and body care, as well as depilatory products. The Portuguese skincare market is one of the smallest in Europe, and the market growth rate is quite small in comparison to other industries. The market growth was weaker than that of the European market, in general. The primary competitors in the marketplace are: Beiersdorg AG, Lancome, Laboratories Garnier, Biotherm, and Lancaster ("Skincare," 2004).

Method of Product Entry:

The method of product entry that Alba Organics is likely to utilize is through direct export. The company is not financially positioned to locate production facilities in Portugal. and, it is unlikely that the small skincare market in Portugal will likely attract licensing from the major competitors already located in the country, such as Lancome and Garnier.

Summary:

Alba Organics has a unique product offering, of high quality,… READ MORE

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